LEGISLATURE: Bill would punish bad faith eminent domain offers

Published 5:28 am, Tuesday, March 10, 2015

AUSTIN -- Entities exercising eminent domain authority could be on the hook for attorney and expert fees if they offer below market value for property under a bill considered by a Senate panel Monday.

SB 474, by Brenham Senator Lois Kolkhorst, would require those payments if it is later determined they initially offered more than 10 percent less than the market value of a property seized through eminent domain. Kolkhorst said she wants to make sure that property owners without vast resources don't feel like they are priced out of the justice system.

"The common person cannot afford it," she said. "This bill is for the average Texan.

Eminent domain has been a major issue in each session since the U.S. Supreme Court ruled in 2005 that entities could use economic development as a reason to take property from private owners. In 2011, the Legislature passed a measure that required that so-called condemner entities offer a fair market price for any property upon which they exercise eminent domain. That law also required all entities with eminent domain authority report to the Office of the Comptroller; that revealed that there are 9245 such entities in Texas, of which 81 percent were governmental bodies or agencies.

Kolkhorst told her colleagues that several other states have laws that offer property owners reimbursement for court expenses in eminent domain cases. Florida and Arkansas, for example, penalize condemners who offer 10 percent below market value, the same threshold in Kolkhorst's bill. Arizona and California allow a judge to determine if property owners are owed reimbursement for fees.

Disputed eminent domain cases can end up in court, with a jury deciding the fair value of the piece of land. Luke Ellis, an attorney who represents property owners in such cases, testified that cases can stretch for years and fees for attorneys and experts can reach into the six figures. So while a land owner might ultimately be given a check for the fair value of their property, after they pay for the process they can find themselves well short of that amount.

"You get adequate compensation less the cost it takes you to achieve adequate compensation," he said. "That's not a fair system."

Other individuals representing industry and government concerns testified against the bill. They worried that the bill would automatically advantage the property owner in court and could offer an incentive on the part of owners to bring fair offers before juries.

"If one party thinks litigation is free, then we're going to have a lot more condemnation cases," testified James Mann of the Texas Pipeline Association. Opponents of the bill added that laws already on the books that set objective standards for a good-faith offer already give enough protection to property owners.

The bill will remain pending for the committee as stakeholders continue to negotiate over provisions in the legislation.